Five Imperatives to an Effective Family Office

It’s amazing how basic each of these five items sound, and yet often one or more are not present in family offices.  The result is frustration by the family, stress in the team, and a high likelihood that families might overlook opportunities to strengthen their returns, mitigate risk, and sleep better at night.  It turns out that managing wealth can be quite stressful.

At a minimum:

  1. Do the hard work and spend the time to clarify and document the family’s vision and objectives. Then align the people, processes and deliverables to meet such requirements.
  2. Hire great people. There is power in having truly competent professionals at every level serving the family.  To the extent that you outsource certain aspects of the family office, this still holds true. Integrity of and trust in your people truly impacts the ability to make life fundamentally better for families.
  3. Deploy the appropriate technology to leverage communications, enhance security and mitigate costs. Too often we implement the easiest to use software only to find the need for extensive manual intervention to deliver meaningful reporting and actionable information. Anytime you include manual processes, it usually means more chance for error and often less reporting is completed.
  4. Calendar the deliverables and meetings required for the year. Setting deadlines and addressing the key concerns for the family ensures sharing that otherwise might not happen, encourages accountability, and allows the family office to continue to calibrate the appropriate deliverables.  For example, an annual review of insurance coverage ensures that any changes made but not previously communicated are addressed.  Investments need to be reviewed much more often, at a minimum quarterly, to ensure the family is not doubling down on risk and is taking advantage of tax-loss harvesting to reduce taxes.
  5. Develop cash flow models that consider the family’s spending history and expected future requirements. Appropriate cash flow models will allow good decisions on how to structure investments to meet the family’s cash needs without fire drills. Clearly understanding cash flows will provide the confidence to take advantage of interesting and potentially lucrative investment opportunities. It will also help allay the natural fear of running short of funds to live their desired lifestyle and achieve familial, professional, or philanthropic goals.

We have the experience and expertise to assist the family in creating meaningful cash flows and reporting that allows the family to leverage net worth, and we have the ability to implement technology that will make an impact on the family enterprise’s effectiveness. For more information on how we can help you and your family office, reach out to arrange an introduction.